Be Your Own Banker
PROTECTION DOLLARS
While there are numerous different assets, property issues, and operating equipment that
require surety protection that falls under the category of insurance, a primary commodity being
the individual’s life itself. What such a life insurance contract is designed to do is replace lost
income and the asset accumulation which would have resulted if one’s life had not been
interrupted by a premature death. It is further designed to provide a revenue stream and lump
sum benefit for those loved ones left behind without the time requirement necessary to havereached those goals that time may have allowed.
How many readings this should we exchange will not have that one major problem of not havinghad time to accumulate the wealth needed to reach one's goals but that does not mean aproperly structured insurance portfolio cannot benefit a person with unlimited wealth once they understand the self-banking concept that can be achieved utilizing cash value whole life insurance.
Whatever one owns directly is subject to the Unified Estate and Gift Tax Tables including personallife insurance contracts. Therefore, the values of a death benefit are includible in figuring any estate taxes which may be due on death or includible in the estate of the second to die if amarried person leaves a death benefit to a surviving spouse. Further items revolve around whether you live in a Community Property state of which there are nine, or in a Common Law
state.
Now if one is wealthy who creates trusts, Living Trusts, Family Trusts, or Foundations and assigns existing life contracts making the entity the owner and beneficiary of the death benefit that value has now been removed from the value of the insured's estate as the insured is no longer the owner. Similar provisions to the beneficiary designations in the life policy can be structured into the trust so the values still reach the initial beneficiary.
The information contained in this document are for educational purposes only.
Now the true value to what can be accomplished having your Trust purchase cash value insurance on you the Grantor of the trust besides how very important you are to the continued operation and direction and the overall successful continuation of this endeavor; is how you can use non-callable loans at very attractive interest rates to further the desired results of this Trust or Foundation for the betterment of mankind.
Permanent or Whole Life Insurance contracts are traditionally more expensive that Term Life contracts and starting in the mid to late sixties the phrase Buy Term and Invest the Difference became a huge marketing surge, The primary reason behind the cost differential was the fact that whole life contracts have a forced savings plan known as Cash Values.
The other difference is these cash value policies have a floor or guaranteed rate of return on these cash values and depending on a multiple of factors, current investment return, mortality factors, and the mortality tables the company is using, the interest rate could range from as low as 3% up to 5.5% also using a participating vs a non-participating policy.
There are also Mutual Companies vs Stock Companies which directly affect your Dividend Participation percentage.
Dividends are higher in Mutual Carriers vs Stock Carriers. Whole Life policies also have a feature known as Paid Up Additions meaning you can effectively buy these additions and thereby be capable of adding additional cash reserves to your contract over and above the basic contracts stated tables. One of the most critical provisions is that you must make a minimum of 4 out of the first 7 years premium payments with new money to avoid the policy being converted from
Whole Life to a Modified Endowment Contract which has adverse tax consequences.
The really valuable provision of these type contracts in the event that your named beneficiary does not receive a death benefit check is they have very attractive loan provisions at very low interest rates considering what banks loan money for today, but they also continue to pay the guaranteed or floor interest rate on the cash values including any loaned amount. What does this mean to you?
Using Insurance policies as your own banker let us review what some terms mean:
DEATH BENEFIT: The Face Value minus any outstanding loans paid to any named beneficiary(s)
upon proper proof of death of the insured.
CASH SURRENDER VALUE: The net value the policy owner would realize were the contract to be
surrendered prior to the death of the insured minus any outstanding loans.
LOAN INTEREST RATE: The maximum interest rates the company can charge for any policy loan
can never exceed ½ of 1 percent above the guaranteed policy base earnings, i.e., if the base
The information contained in this document are for educational purposes only.
earnings are 4.5% the maximum charge for any loan against the cash value reserves would be
5%.
The company will only loan up to 98% of the current cash surrender values of the accumulated
cash values plus paid-up additions of the stated death benefit face amount to insure the non-
callable provisions of the policy contract remain in effect.
There is no loan repayment period of principal as long as the annual interest expense is current and paid in advance on each successive anniversary of loan renewal.
There are more items discussed in the links below. What does this mean in real terms to anyone using this concept?
• Assumptions you wish to purchase a new vehicle for $22,000.00.
• The local bank is willing to make you a loan for the current auto loan rate of 11%.
• So 22k @ 11% = $2420.00 / year for 3 years or a total interest expense of $7,260.00.
Now assuming you have a policy with enough cash values to match the above illustration here is the difference to acquire the same automobile.
• $22,000.00 @ 5% interest = $1,100.00 offset by guaranteed earnings on cash value of 4.5% = $990.00 or actual loan expense of $110.00 per year over 3 years or a net cost to
use the funds of $330.00.
• Your gain being the difference between $7,260.00 and $330.00 or a savings of $6,930.00 in out-of-pocket cost to use your banker vs establishing your own bank.
The smart investor recognizes that a new vehicle will be on the horizon every 3 years, so you do in fact set up a loan repayment plan recognizing with every payment made your loan expense reduces and you’re earning on cash value reserves increases thereby making the true cost even
less than the above illustration. Think about college education costs for the grand kids or any number of applications to this concept or read more about it below.
https://bankingtruths.com/articles/
https://bankingtruths.com/awr-5-steps-to-build-your-own-bank-with-whole-life-
insurance/?utm_source=organic&utm_medium=articles-page&utm_campaign=site
